Banking federation admits dollar shortfall

French banks face difficulties in raising short-term cash in dollars, the head of France's banking federation said on Monday confirming a recent study by Moody's Investors Service.

While liquidity in euros posed no problem, “refinancing in dollars is more stretched,” Francois Perol, head of the French Banking Federation told Les Echos newspaper.  

Moody’s said in a report on Thursday that French banks, because of their global reach, were more vulnerable to liquidity issues than their European counterparts.  

Many US money market funds have reduced their exposure to European banks as sovereign debt problems in the eurozone have worsened, Moody’s said.  

The agency said that unlike banks that can rely heavily on deposits for cash, some French lenders have great needs for financing in dollars.  

Ariane Obolensky, chief executive of the banking federation, said that dealing in the dollar lending market was harder for French banks but that there was no need to worry.  

“It’s more expensive” and for less time, she said regarding banks’ liquidity loans in dollars.  

She denied however that lending between banks was under duress even though official data showed that eurozone banks deposited the biggest amount of overnight funds at the European Central Bank so far this year on Friday.  

The level of these deposits at the central bank is an indicator of the reluctance of banks to lend to each other on the pivotal interbank market.

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France unveils big-spending budget to tackle Covid-shock and pledges no new taxes

France launched a free-spending budget plan on Monday, saying a fresh spike in new Covid-19 cases justified its unprecedented loosening of the purse strings.

France unveils big-spending budget to tackle Covid-shock and pledges no new taxes
French finance minister Bruno Le Maire. Photo: AFP

After €460 billion of emergency spending this year to save the economy from the virus fallout, the government built its 2021 budget plan around a €100-billion “recovery plan”, first announced this month and partly funded by EU money.

The budget came after France's health services on Saturday reported 14,412 new virus cases over the previous 24 hours – only slightly lower than the record 16,000 registered on both Thursday and Friday.

READ ALSO IN NUMBERS Covid-19 cases, hospitalisations and deaths in France


The fresh spike threatens to overwhelm hospitals, health officials warned, while the government imposed fresh curbs to limit the spread of the virus, including on restaurants, bars and sports facilities.

“There is no reason to give up the idea of a recovery just because the health difficulties have re-emerged,” Finance Minister Bruno Le Maire told a news conference.

The spending boost is to help the French economy to rebound strongly next year, by eight percent according to the budget, after crashing by an expected 10 percent this year, Le Maire said.

“We are implementing this recovery fund so it can be used up quickly and have the greatest possible impact on growth,” he said.

But the growth forecast immediately drew criticism from France's high council for public finance, a state body charged with making sure that government budgetary assumptions are realistic.

The growth target was “pro-active”, given the “great uncertainties” weighing on the economic outlook because of the coronavirus, the council said.

It also called on the government to be mindful of public debt which has ballooned since the start of the crisis.

France's annual deficit is estimated at 10.2 percent of GDP this year, and is to come in at 6.7 percent in 2021, the government said.

This compares with a permitted ceiling of three percent for eurozone countries, which the EU has however lifted temporarily as governments grapple with the crisis.

The government has promised that it will not raise taxes to pay for the recovery.